- Watercare’s map highlighting water and wastewater constraints in Auckland has raised concerns among developers and agents.
- Developers, including Craig Alexander, say the constraints create uncertainty and potential financial losses.
- Watercare’s Priyan Perera insists there is no blanket ban and says many will still be able to go ahead.
A move by Watercare highlighting areas in Auckland where new housing developments may not be able to immediately go ahead because of insufficient water and wastewater infrastructure could have a massive impact on housing stock and house prices, developers and agents claim.
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But Watercare says the constraints have not changed and the only thing different is its decision to release a map showing where there was and wasn’t capacity in the wastewater and water systems to give developers an early heads-up and save them from any headache.
The water and wastewater constraints map released last month has grouped properties in suburbs where there is little or no capacity. Some of the worst affected suburbs have been put in a “red zone” and may not be able to be developed until the network is upgraded in 10 or more years.
Watercare has released a map highlighting which Auckland suburbs are facing water and wastewater constraints. Image / Watercare
BA Group director Craig Alexander said the change was significant and he had been “blindsided”.
He was one of many developers to learn months later that his development was in an area where there were wastewater constraints. The 800sqm section with one home in Henderson was purchased in May with plans to put an additional two homes. Last week during the final stages of getting the resource consent Auckland Council pushed back and advised it would need to check with Watercare about whether the development could proceed because of wastewater constraints in the area.
Alexander said the company had carried out all its due diligence before purchasing the property to make sure that they were zoned correctly and had the correct wastewater and stormwater infrastructure. Since then, the Henderson site had been tagged as having wastewater constraints, which would not be addressed until 2030 to 2035.
“There was no warning of this. Watercare as an entity should know what its network capacity is for all of its services,” he said.
“It’s a blindsider. There are some developers that have bought multiple sites with a lot of funding through second tier and now those sites if what Watercare has said they don’t allow connections – what is it worth now? These people will go under.”
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Developers paid a premium for these developable sites, he said, so if it could not go ahead then he would have to sell it at a loss.
He said most people who had a development site in the red zone would not be able to hold them for 10 years because it would not make financial sense.
“They would have lost money on the value of the site plus they would have lost all of the expenses they have spent on the resource consent including council fees and the like.”
Alexander said it should have been a two-year lead-in so there was a transition period rather than putting a blanket ban on development in some areas without any warning.
“Basically it creates this massive uncertainty and Watercare all of a sudden become the master of where development can or cannot occur in Auckland.
“What council entity can justifiably do this sort of thing that just blindsides a complete industry.”
Watercare engineers inspect the southern section of the Central Interceptor tunnel, in Auckland. Photo / Supplied
Harcourts JK Realty business owner David Findlay said while people had learnt about constraints on certain properties on a case-by-case basis, no one had been expecting a blanket ban.
“People bought having no idea they were going to be completely cut off like this.”
His West Auckland-based agency had five conditional property deals worth several million dollars all fall over within a few hours after the Watercare announcement around constraints.
“Everyone is saying if I’m not unconditional I’m just going to pull out and wait and see,” he said.
“The areas with the overlays are just so tough that why would you. If you are a developer and you’ve got an area that’s got this potential massive water issue and you’ve got a site that doesn’t – which one are you going to put the money down on? You’re always going to do it on the other one.”
Watercare’s actions would have a polarising effect on properties, he said. Those in areas with no constraints were suddenly in high demand and had risen in value almost overnight, while those that were constrained were harder to sell as there was a much smaller buyer pool and were worth less.
Harcourts JK Realty business owner David Findlay: “People bought having no idea they were going to be completely cut off like this.” Photo / Supplied
Findlay had been speaking with an elderly woman looking to sell her rundown home on a 1200sqm site in Massey so she could relocate out of town to be closer to family. The site was appraised at $1.2m prior to the Watercare constraints being introduced, but Findlay said she would now be lucky to get $900,000.
Findlay also stood to make a loss on a development site he bought in April and was in the process of getting a resource consent for if Watercare did not believe there was enough capacity on the network for his development.
“If that’s the case [can’t develop it] then I’ve overpaid by $250,000 - $300,000. I will lose $250,000 on that plus that $80,000 [on resource consent].
But Watercare chief strategy and planning officer Priyan Perera said it did not necessarily mean a development couldn’t go ahead and encouraged developers to get in touch with Watercare who would assess each site on a case-by-case basis.
“The map is never a blanket no. It’s really highlighting the constraints we face. Sometimes they are street by street constraints but a lot of them are connected to what we call our bulk infrastructure.”
Perera said developments in areas such as West Auckland and South Auckland that were nearing capacity would likely still go ahead. The remaining capacity would be allocated on a first-in first-served basis.
Watercare chief strategy and planning officer Priyan Perera says there is "no blanket ban" on developments in areas facing constraints. Photo / Supplied
Areas such as the lower North Shore and most of Waitakere, developments of fewer than 10 houses could proceed as long as there was capacity in the local network pipes. While developments in Beach Haven, Ōtara-Papatoetoe, Cockle Bay, Mellons Bay, Te Atatū, Te Atatū Peninsula and Favona were all assessed individually and decided based on the exact location likely impact to the wastewater network.
Of more than 1000 enquiries received since sharing the map, more than half have been approved and only 23 had been declined. The others required more information or were still being assessed. The number of enquiries had increased since the map was released, but Watercare was aiming to respond to people within 10 working days.
Perera said the aim of the map was to help developers carry out due diligence before buying a property to support their decision-making whereas before they would have only learnt about the constraints during the consenting process.
“The worst-case scenario for us is that someone traverses quite a bit of expenditure and work to go and develop a property and then comes to the last hurdle of confirming connections and capacities and that’s obviously an extreme scenario, but that‘s something we want to avoid.”
Watercare had already carried out a lot of new infrastructure in the last 10 years and in the current financial year was investing $1.2 billion in new and upgraded water and wastewater infrastructure. Perera said the planned work was part of a $13.7 billion investment planned for the next decade which would release capacity into the network.
“It’s absolutely not a dire situation. We are not putting an absolute halt on growth and development. We’ve got many projects that we are delivering that will release the constraints we face now.”
“Most of Auckland still has capacity available. It’s just around the timing of investment. When we can do things, when we can afford to do things. We don’t have unlimited resource or funding in New Zealand so it’s about how we balance that approach.”
Housing in Pokeno, in South Auckland. There are fears that the changes will have a drastic impact on the viability of new developments in South Auckland. Photo / Getty Images
He also dismissed claims from both developer and real estate agents that the constraints would have an impact on the property market. “I don’t acknowledge there’s any specific influence connected to water and wastewater servicing. I suggest that the market has shifted a lot in the last two years and our job is to try and create the ability to build, but the market has changed for other reasons.”
But Harcourts New Age salesperson Harsh Kathuria, who sells in South Auckland, said he was already seeing the “drastic” impact of the constraints on the South Auckland market. He said suddenly some houses that had been developable before being put in the red zone were worth hundreds of thousands of dollars less.
“I’ve got a lot of properties which fell through the roof in terms of the prices. And the owners – I don’t have any words to say. I’ve got a beautiful family who have been sitting on the property for seven years and they suddenly put it on the market and they’ve been told it’s red zone. All their dreams are shattered,” he said.
Kathuria said developers were suddenly no longer interested in properties that could be impacted by the constraints, leaving a much smaller buyer pool.
“How many homebuyers would spend $1m / $1.1m on a rundown house on 800sqm. They won’t – they have a different mindset. There are tough times ahead for Auckland.”
Lateral Partners managing director Ben Pauley, who focuses on raising finance solely for developers, said the constraints would make developing property in Auckland “pretty difficult”.
People who had used second-tier lenders to acquire land to develop and could no longer do so immediately would have to think about selling it, he said. This would halt development on some sites and also impact property prices.
“The real issue is that the cost becomes quite prohibitive if you are talking debt at 14%. It’s very hard to manage those costs over a prolonged period so if the infrastructure is not going to be upgraded until 2035 I don’t think many people are going to sit there for 10 years looking to land-bank a position, they might just count their losses and take a slight discount on the sale price of the property but alleviate the concern of having to pay the finance cost for a prolonged period.”
Developers he had spoken to were holding off acquiring land or looking at buying in other locations that were not red-stickered by Watercare or in a different city.
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